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New public procurement act (Czech Republic)

On 22 April 2016, the President of the Czech Republic signed the new draft Public Procurement Act which was approved by Parliament. The act should have originally come into effect three months after its publication in the Collection of Laws. However, the Chamber of Deputies eventually agreed to the Senate’s proposal to postpone the effective date by another three months. Finally, the act will come into effect from 1st October 2016. The six-month interim period (vacatio legis) should provide more time to those affected by the new legislation to make adjustments and to sufficiently prepare for the implementing regulations. We briefly summarise below some of the changes and developments relating to the new act.

The Act transposes three new public procurement directives adopted at the EU level, and will become a key code of Czech legislation regulating public investment. This change is the largest legislative change in public procurement in the last 10 years. The new legislation will bring a number of positive changes, however, it contains also a larger number of new legal concepts, and opens a number of questions which will require sufficient and timely preparation.

One of the main objectives of the Public Procurement Act is the reduction of the administrative load connected with public procurement, and the related cost savings. The Public Procurement Act aims to make the whole procedure more efficient and flexible. The main and logical benefit of the Public Procurement Act is the possibility to evaluate only the bid of the selected supplier. Thus, contracting entities will no longer be obliged to consider the bids of other bidders to whom the contract will not be awarded.

Contracting entities will have a wider range of options for adapting the course and conditions of the award process according to their own rules; suppliers will consequently have to pay a closer attention to the tender documentation. Another tool for increasing the flexibility of the award procedure is the introduction of a “light procedure”. Under the simpler and less formal light procedure, public contracts without a substantial crossborder impact will be awarded, e.g. contracts for cultural, medical, social and also legal services.

The Public Procurement Act brings express rules for so called “preliminary market consultations”. The purpose of this concept is to obtain information on the subject matter of the public contract, and the possible manner of its performance, in order to enable the contracting authority to define the conditions for participation in the procedure as openly and precisely as possible. The contracting entity may hold consultations also with suppliers who will subsequently bid for a contract was about which they were consulted in advance.

In line with public procurement directives, the Public Procurement Act extends the reasons for which a bidder may be disqualified from the award procedure. These may be, for example, reasons relating to the bidder alone, such as its former professional failures or serious breaches of contracts or conflicting interests on the part of the bidder, or its attempt to influence the decision of the contracting entity or to obtain non-public information which could provide the bidder with illegitimate advantages. At the same time the winning bidder will be obliged to submit documents proving the structure of its assets, and, in the case of joint stock companies, the winning bidder must have its shares in a book-entry form.

In connection with the extention of the reasons necessary for disqualifying a bidder from the award procedure, please note that the Public Procurement Act will, at the same time, allow the bidders to defend themselves against disqualification by proving the reestablishment of their qualifications (so called “self-cleaning”). In this context suitable remedies include, in particular, full compensation for damage caused by a (professional) failure, payment of due amounts, adoption of preventive measures, or active cooperation with the competent surveillance authorities.

The draft of the Publicc Procurement Act no longer contains any regulation of administrative offences of the supplier or sanctions for their commission, including a black list (a list of entities banned from performing public contracts). This is due to the fact that, in practice, administrative offences and sanctions did not prove to be an efficient tool for the protection of the contracting entity, and rather, they tend to be abused in competition with other suppliers.

The Public Procurement Act erxpressly declares the preference to evaluate bids based on qualitative criteria, rather than on bid price only, which in many cases proved to be insufficient for the selection of the most advantageous bid. Among other matters, the Public Procurement Act allows determination of a fixed price, while the bids are evaluated only on the basis of qualititative criteria (such as the quality of the professional team).

A new and comprehensive regulation will govern changes of an obligation under a public contract. The Public Procurement Act expressly stipulates that if a change of the contract does not pose a “substantial change”, such a change can be made without organising a new award procedure. As a novelty, the category of “de minimis” changes is introduced, which will permit the making of a change in an obligation if such a change does not amount to 10% (or 15% in the case of construction work) of the original value of the public contract or the financial limits of above-limit contracts.

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